Oil prices climbed for a third consecutive session on Tuesday, approaching three-week highs as deteriorating prospects for a US-Iran peace agreement increased concerns that disruption to Middle Eastern energy supplies could continue.
Brent crude futures rose 35 cents, or 0.39%, to $91.22 a barrel by 0827 GMT, while U.S. West Texas Intermediate crude futures advanced 81 cents, or 0.96%, to $85.31.
Brent reached its highest intraday level since July 30, while WTI touched its strongest point since July 31. Both contracts were on course to record a third successive daily gain.
“Sentiment remained supported by US President Donald Trump’s decision not to extend the US-Iran peace agreement and continued security concerns in the Strait of Hormuz,” ING analysts wrote in a note.
Iran’s Offensive Shift Clouds Prospects for Peace
Oil markets have become increasingly sensitive to developments surrounding negotiations between Washington and Tehran, with progress towards a permanent settlement now appearing to have stalled.
Normal tanker movements through the Strait of Hormuz have also failed to resume, prolonging disruption to the strategic waterway following the conflict launched by the United States and Israel with attacks on Iran on February 28.
A senior Iranian official told Reuters on Monday that Tehran would move to a “fully offensive” military posture after efforts to reach a permanent end to the war stalled. Washington has meanwhile ruled out extending the temporary ceasefire agreement.
The breakdown is also beginning to influence expectations for oil prices beyond the immediate crisis.
“The lack of any kind of deal will have an impact on oil price expectations further out in 4Q and even in 2027,” said DBS Bank’s head of energy research Suvro Sarkar.
Vessel Strike Highlights Continued Hormuz Threat
Security risks surrounding the Strait of Hormuz remain elevated after another vessel was struck on Tuesday.
A projectile hit a ship travelling out of the strait, adding to a series of attacks that have kept the number of crossings in single digits. Tracking data indicated that traffic had improved slightly compared with the weekend but remained severely restricted.
The continuing disruption is particularly important for oil markets because of the volume of Middle Eastern crude normally transported through the waterway.
Saudi Aramco has resumed loading oil from inside the Strait of Hormuz and is offering cargoes through ship-to-ship transfers off Fujairah in the UAE, creating another route for moving supplies despite the disruption.
Iran’s Ability to Restrict Oil Exports Remains Key Risk
Analysts are increasingly considering the possibility that Iran could further restrict energy flows if the military confrontation escalates.
“It is probably in Iran’s power to fully halt the flow of oil out of the Strait of Hormuz whenever they find it suitable. Or they will soon have built the capability of that. Iran is for sure not just sitting still waiting for new US sanctions,” said SEB analyst Bjarne Schieldrop.
Separate negotiations between Iran and Oman over management of the Strait of Hormuz are continuing, with Tehran saying the two countries are close to reaching an agreement.
However, Trump has responded to those negotiations by threatening to bomb Oman, despite the Gulf state being a longstanding U.S. security partner.
Red Sea Attacks Add to Middle East Shipping Concerns
Risks to regional shipping are not confined to the Strait of Hormuz.
Yemen’s Houthis launched missiles at vessels they described as a Saudi military ship accompanied by four escorts in the Red Sea, military spokesperson Yahya Saree said on Telegram.
The incident adds another layer of uncertainty for shipping routes through the Middle East at a time when oil markets are already dealing with severe disruption around Hormuz.
With diplomatic negotiations stalled, tanker movements constrained and military risks spreading across key maritime corridors, crude prices remain vulnerable to further geopolitical premiums as traders assess supply conditions for the fourth quarter and into 2027.
Leave a Reply